Trump’s tariffs threaten to derail UK’s homebuilding market

The UK’s homebuilding sector is fearful of the challenges imposed by President Donald Trump's 10% tariffs on all UK imports to the U.S.

The new tariffs, which have disrupted trade between the US and the UK, could potentially drive up how much it costs to build a house and delay key housing projects.

This could further hamper the UK government's goal of building 1.5 million homes as well as repercussions for homebuilders and renovators across the countries who could see the price of their project increase significantly.

Rising material costs and supply chain disruptions

President Trump introduced a 25% tariff on steel and aluminium imports, which has had a significant impact on the UK’s construction sector.

Though only 5% of UK steel exports and 6% of aluminium exports go to the US, industry experts warn that the broader effects of these tariffs are far-reaching. British Steel, for example, recently announced plans to close its last two blast furnaces, citing these tariffs as a key reason.

Steel is a crucial material in homebuilding, and any disruption to its supply can have serious consequences for construction projects. With the cost of imported steel and aluminium expected to rise, UK developers will face increased expenses, putting even more strain on an already fragile housing market.

Aluminium, another critical material, is also subject to tariffs. These duties are likely to affect the availability and cost of aluminium products used in construction, such as window frames, roofing, and cladding. Builders may face increased expenses as they seek alternative suppliers or absorb higher material costs.

The knock-on effect will likely lead to higher house prices and delays in the construction of new homes.

Tariffs a 'devastating blow'

In response to these developments, UK industry leaders have urged the government to take decisive action.

Gareth Stace, Director General of UK Steel, described the tariffs as a "devastating blow" to the UK steel industry, warning that they could harm the UK's balance of trade and lead to job losses. He emphasised that UK steel products are essential for sectors like defense and aerospace, underscoring their irreplaceable value.

The government faces the complex task of balancing diplomatic relations with the U.S. while safeguarding domestic industries and housing objectives. Strategies may include negotiating tariff exemptions, seeking alternative material suppliers, and implementing policies to bolster domestic production capabilities.

The impact on the UK’s housing targets

The UK government has long aimed to meet the pressing need for new homes, especially in light of a growing population and housing affordability issues.

Labour’s target of 1.5 million new homes is a key part of its housing strategy, but the combination of rising material costs, supply chain disruptions, and an already strained workforce makes achieving this target increasingly difficult.

Rachel Reeves, in her Spring Statement, has already revised the target down to 1.3 million homes, acknowledging that the original goal is unlikely to be reached. The tariffs on key building materials such as steel and timber only exacerbate the problem, making it harder for developers to stay within budget and meet deadlines.

The path forward

The tariffs on steel and aluminium, combined with the skills shortage, are pushing the UK further from its housing target.

Developers are already grappling with higher material costs and lengthy delays, which could prevent them from building enough homes to address the UK’s housing crisis.

While the UK government has made efforts to address the skills gap by aiming to introduce 60,000 new construction workers, the sector needs to tackle much larger workforce shortages.